ESG Disclosure and Financial Analysts’ Accuracy in Saudi Arabia: The Moderating Role of the 2021 ESG Guidelines

This study explores how environmental, social and governance (ESG) disclosure relates to analysts’ forecast accuracy in Saudi Arabia, focusing on the ESG disclosure guidelines introduced by the Saudi Stock Exchange (Tadawul) in 2021. It suggests that ESG disclosure enhances corporate transparency, decreases information asymmetry, and provides analysts with additional non-financial information that can improve the earnings forecast quality. Furthermore, the introduction of ESG guidelines is likely to enhance the consistency and reliability of sustainability reporting, thereby strengthening the informational environment of the capital market. Based on a sample of listed firms from 2017 to 2024 and employing panel regression techniques, including fixed-effects and two-step system generalized method of moments (GMM) estimations, the results indicate that a higher ESG disclosure is associated with lower analyst forecast errors, reflecting an improved forecast accuracy. The findings also reveal that the forecast accuracy increased following the ESG guidelines’ introduction and that the connection between ESG disclosure and analysts’ forecast accuracy became greater after the implementation of the guidelines. Our results demonstrate the informational value of ESG disclosure and suggest that ESG reporting initiatives can boost the quality of financial information in emerging markets.